by NiekvdMaas on 4/24/23, 11:34 AM with 26 comments
by londons_explore on 4/25/23, 10:08 AM
Specifically, both electricity and gas have robust futures trading markets. And gas can be converted to electricity.
So... In the ideal world, whenever the price of gas is higher than the price of electricity, gas generators should shut down - since there isn't money to be made.
However, looking at market data for the UK, that only happens sometimes. There are plenty of generators who, according to spot market prices, shouldn't be operating, yet are.
Obviously some gas generators might have purchased low priced gas futures, or have sold high priced electricity futures - making it profitable to operate. However, even gas generators in that position stand to profit more by shutting down and reselling the futures they have bought on the open market.
It appears that even big companies make suboptimal market decisions on quite a frequent basis.
I suspect the cause is general lack of business flexibility. If such inflexibility is widespread, it would be a good reason to disallow futures trading entirely - by forcing people to buy things as they use them, they are forced to notice that what they are about to do isn't profitable - and the futures market hides that from them.
by neals on 4/25/23, 8:11 AM
by fboerman on 4/25/23, 10:00 AM
by Reason077 on 4/25/23, 10:57 AM